Christopher Whiteside is a Conservative activist who lives and works in Copeland with his wife and family.
Chris is a recent chairman of Cumbria Conservatives, a former member of Copeland Borough council, and an Honorary Alderman of the City and District of St Albans. He is a former Conservative parliamentary candidate, and stood in the 2015 Mayoral election in Copeland.

Tuesday, February 19, 2013

More first time buyers

Only the most complacent person could argue that we are out of the woods on the economy, but there are some encouraging straws in the wind, one of them being that the number of first-time buyers has reached the highest level in five years
according to figures recently released by the Council for Mortgage Lenders.

A total of 216,200 first-time buyers became
homeowners in 2012. This is the first time that the number has exceeded 200,000
since 2007 and is an increase of 12% compared to 2011, when 193,000 first-time
buyers took out mortgages.

The Council for Mortgage Lenders stated that
first-time buyers 'have benefitted from the effects of better funding conditions
and the Funding for Lending scheme'. The Funding for Lending Scheme was launched
by the Bank of England and the Treasury in July 2012 to encourage lending to
households and businesses.

The Government's economic policy to try to balance the books has won the
confidence of markets and secured record low interest rates for the UK. The
Funding for Lending scheme works by allowing banks and building societies to
take advantage of this and borrow from the Bank of England at rates which are
below current market rates, thereby encouraging them to make loans like
mortgages more freely available.

Banks and building societies which loan more can
borrow more from the Bank of England, and at lower rates, encouraging them to
lend more to borrowers like first-time homebuyers.

5 comments:

We are in the middle of a phoney recovery, which is only "kicking the can down the road" as when the real crash does come (and it will before too long, will come from the USA) the pain is much greater.

The problem started really by printing cheap fiat money and lending it at interest rates which are far too low (much lower than they would be set by the free market). This caused silly investments to be made in daft internet stocks (at one point the 2 year old company Yahoo, was valued higher than the entire stock exchange of New Zealand, which would you rather own?) but daft investments were made, as the investors were drunk on cheap fiat money. Of course the dot com bubble burst, not too bad as only the people who made the silly investments paid the price. The government/ BoE then decided to stimulate the economy by lowering interest rates further. Creating even cheaper fiat currency, thus inflating a bubble in real estate, pushing real estate far higher in value than its true worth, Who cares, money was cheap enough, and with easy mortgages then what the hell? what can i lose? If it makes money in 5 years thats mine, if it crashes then so what (i put nothing down, so i walk away) Of course the housing bubble burst, but this time the risk takers were the lenders, they collapsed (at least they would have with out government intervention) the price of houses should have really crashed, and I mean have plummeted, they would have too, but the government stepped in with more printed cheap fiat currency, thus inflating the value away from the pound, yet hiding it by nominal values remaining stable (QE). Inflating the current government bubble. Houses are overpriced so first time buyers find them hard to buy, thats a good thing, it prevents mis investment, rather than allowing the real estate prices to return to market levels, The government has decided to print even more cheap fiat currency (inflation) and hold interest rates at stupidly low levels (encouraging more mis-investment)

In short, the government are encouraging (with taxpayers money) the BoE to inflate the value out of the pound, lend it to young first time buyers so they can buy a greatly overpriced house, until the government bubble bursts (does not matter than if they choose inflation, or default) the fact remains that those people will be in dire straits when the interest rates are forced to raise dramatically.

One other, just for the record. Myself and my wife own a house each. Mine (Whitehaven) is going on the market in the next week or so. Then we will move to hers (Carlisle) for 6 months, then sell that.

We will then move back towards Whitehaven (to a rented house) after investing the equity from the 2 houses in smarter investments than UK real estate. perhaps 80% offshore dividend paying energy stocks, and 20% shiney gold as an inflation hedge. (Readers may like to look at Energy and resource stocks in Singapore, Australia, New Zealand, Canada) BUT DO YOUR OWN HOMEWORK FIRST.

Mind you I will say its not all bad news, could be worse, we could be stuck in US Dollars and Real Estate.

Whenever a government of any colour thinks that it has repealed the laws of economics and found a way to permanent rapid growth with low unemployment and inflation, it usually means that the country is heading for a crash. (I'm sure you remember "No more boom and bust").

However, when a country is, trying to recover from a recession, it is much less likely that you will get the sort of false optimism among buyers or lenders which causes price bubbles (and of course is what caused the world recession in the first place).

I certainly don't get the impression that UK banks and building societies are encouraging people to borrow money they can't afford to buy a house they can't afford just at the moment. Having paid the price for doing that in the "noughties" they are now erring in the opposite direction.

You are right they are not encouraging people or small business to borrow, yet they are still lending. They are buying UK & US treasury bonds. This is causing the pound to de-value all the time.

The end result is that either we enter into Hyper inflation, 1920's germany and Zimbabwe style, or the government defaults. (its really the same thing) but the only thing it will lead to is high interest rates. The biggest problem with the market at the moment is that interest rates are being held way too low. The longer its left until they are raised, the higher they will raise in the end. If we wait for the crash of the government bond bubble before doing so then that will be the worst case for all. Not least of all those stuck with a huge mortgage on a vastly overpriced house, which is now only worth 1/3 of the outstanding mortgage.

now please let me show you using my home, how house prices would have / should have / and in real terms have fallen.

In 2008 I bought this house for £66,000 (it was repossesed)

So at 2008 prices I paid 132 troy oz of gold for it.

Its value on the market today (just valued by 3 estate agents) between £70,000 and £75,000. Lets take the average £72,500.

At todays prices that is 71 troy oz of gold.

So we can see that though my house has gained nominal value in pound terms, its actually dropped a lot in value, its a combination of my house being overpriced when i bought it and the pound dramatically falling in value.

In short this house has lost 61 troy ounces of gold (almost half its value) in the last five years